Tips for seeking funding / backing projects

FUNDING ADVICE

Check for competition

Before you launch, check to see what projects are being funded at that time. If a campaign for a product similar to yours has just started, you might want to delay. Robert Murray, founder of Irvine-based Router Research, said his campaign to fund The Guardian wireless router recently fell short of its $358,000 funding goal when another router project launched alongside his, creating unforeseen competition for potential backers.

Customer service is key

Respond quickly to donors, said David Alagband who was behind the DNA Case for iPhones on Kickstarter, even if that response is a simple, 'thank you'.

Lower those expectations

"Give yourself a reality check: How much money do I really think I can make," said Anthony Jones who raised more than $55,000 for his art book. Aim for a realistic figure, and you're more likely to get that, and more. If you don't raise enough to reach your threshold in the time span you have, you won't get any of the money you raised.

Along those same lines, make sure whatever you're proposing to produce is something you can really make. Nothing like getting the financial backing of hundreds of people eager to see your project materialize, and not be able to follow through.

Post a video

Potential backers want to see your product in use, and a video is one of the best ways to document what you're pitching. Kickstarter says on its website that projects with a video are funded about half the time, while only 30 percent succeed without one.

If you built it, there's no guarantee they'll come

"Have a tribe going in," said Jodi Sagorin who funded her T-shirt company and a trip to India through Kickstarter. Having a built-in fan base helps to literally kick-start your project.

Give to get

Of the 32 successful Irvine-based Kickstarter projects, 23 creators have donated to other campaigns.

"When you start funding other projects," said Roy Cortes, who successfully funded a 3-D printer control panel, "you see how they go about fulfilling all of the pledges, offering support and actually delivering the project. You can actually gauge how you need to do things in a timely manner to deliver and keep all your promises."

Cortes said those who he had backed had also donated to him in turn

No rest for success

Sure, all the family and friends you emailed your Kickstarter link to rushed in early on to contribute, but then the donations stopped. With rare exceptions, Kickstarter isn't one for the sit-back-and-wait types.

About halfway to her $2,500 goal, Bequi Howarth with OC Mini Maker Faire became an emailing and social media machine, ultimately going to friends at the end and begging for the last bit of funding that would put her event over the top so she could take home what was raised.

No escaping taxes

If an investment isn't going to charity, donors can't claim charitable deductions. Nor can projects seeking funding claim that they're getting "gifts" from their donors. If they were gifts, the project developers wouldn't have to claim it as income. But since they are actually giving each investor a "gift," it turns into an exchange – and that makes it taxable, said Candy Huie, a tax partner with the Irvine CPA firm White Nelson Diehl Evans.

The amount raised could be taxes anywhere from 10 percent to 36 percent by the federal government and 1 percent to 13 percent depending on which state the project developer is based, Huie said.

If you don't succeed, try again

Four of Irvine's 32 successful Kickstarter campaigns were failures their first time around. If you don't reach your goal during your first go, assess what went wrong. During your next try, you can lower your funding goal, promise better rewards, improve your product or alter your promotion. Ask Kickstarter users what they would like to see changed, revamp and take another shot. Be careful not to underfund your project on your second try.

BACKING ADVICE

Choose wisely

When you consider backing projects launched by people other than your relatives, coworkers and friends, it is important to have confidence that, if funded, the creator can deliver on their promises. Kickstarter warns on its website that while the company reviews projects to ensure they meet certain guidelines, it does not assess creators' abilities to actually do what they propose. The solution? Do some research on the company or individual you're looking to back and determine whether you have faith that they can pull it off. Search online, message the creator for more information, look at whether the user has launched other Kickstarter projects and check how those turned out.

Don't expect rewards to arrive on time

Keep in mind, you're not making a purchase or a preorder, you're donating in return for some sort of reward. Though project creators are required to post an estimated delivery date, there is nothing to guarantee they'll deliver on time. A December 2012 CNNMoney article examining the 50 top funded projects scheduled to ship during the previous few months found that 84 percent of those projects shipped late and several had not shipped at all. Likewise, several Irvine-based projects have had problems sending out their rewards by the estimated delivery date. Teadrop, a loose-leaf tea maker created by an Irvine man, has postponed delivery by almost two years because of design problems.

Nonprofit deductions

Though most investments are viewed as an exchange of money for goods (the reward item), Kickstarter says some campaigns launched by nonprofit organizations could offer backers an opportunity for tax deductions. These projects would likely boast this information on their project page, Kickstarter says, but backers should also plan on contacting the creator for proof of nonprofit status and ask questions about potential deductions.

Whether it's to pay for an artist's first collection of work, provide the seed money for an event or raise the cash to make a homemade line of T-shirts look a little more boutique-ready, Kickstarter.com has become the online destination for making ideas a reality.

The site links those with a plan but lacking funding to an internet community interested in pledging anywhere from $1 to thousands of dollars each to see something built or make something happen.

Since its 2009 launch, the website has attracted would-be entrepreneurs, creative types and even already well-established actors and directors interested in floating projects that might appeal more to a niche audience than a Hollywood studio. (Just search for "Veronica Mars" and see the serious effort to get the former television show made into a movie. It raised $5.7 million.)

During that time, 32 Irvine-based projects have been funded, raising $4.65 million.

And after a good kick start, some of those Irvine companies have revved up to experience success away from the website.

Art

Heaven's Hell – Goal: $9,000/ Raised: $55,751

Artist Anthony Jones's publisher needed $9,000 to print his first collection of character artwork. His fans gave him more than $55,000. The video game and film concept artist said he was blown away by the outpouring of financial support on Kickstarter that allowed him to do even more, namely set up a studio outside of his home and devote extra time to his artwork. His success is just one example of the shift in publishing control including video game designers bypassing the major video game distributers by getting funding from an online crowd. For Jones, there was no guarantee of any profit trickling down to him before. Now, he's more of a partner, less of a customer with the publishing company producing his book.

Life after Kickstarter: Jones won his funding at the end of January, so the artist has been finishing his art book and preparing how to package and send prizes to investors (imagine signing more than 6,000 prints) when he's not at his day job being a concept artist for Paramount Studios. He's also hoping to make a pitch to make his characters into a movie and aiming to have his book finished by July in time for the San Diego Comic Con.

Jodi Sagorin was at Woodbridge High School when the young entrepreneur got an invite to try something very new – Kickstarter. She used the money she raised to make the doodles she had drawn by hand on white T-shirts and sold to classmates look more professional with 500 screen printed shirts. She said people make the mistake of thinking the site will dramatically grow a person's customer base. In reality, she already had built-in customers before she sought the funds and those were the same people to buy her shirts.

Life after Kickstarter: Sagorin is 22, attending Orange Coast College and has applied to pre-med programs. After the success of Pirate Bath, she raised $4,000 that same year through the site to go to India to learn about rural micro-financing firsthand – essentially helping local women in remote villages build businesses through small, incremental investments. She's also continued raising funds for nonprofit projects.

Quote: "You want people to feel like they're a part of the story," she said. From India, she sent prizes such as postcards and saris to the individuals who helped fund her trip.

Building a better iPhone case remains an industry unto itself. David N. Alagband, a business school graduate in real estate development, joined the crowd in 2011 because he thought it a travesty that the phone itself – revered for its simple modern design – was often shrouded in an unsightly case. With DNA Case, he designed one featuring two solid pieces of aluminum screwed together to sandwich the iPhone. And for the stumble prone, he added a rubber bumper so the phone could take a few shocks to its system. His design was already in production overseas when he sought funding on Kickstarter to reach out to potential customers.

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